LBO margins in Europe could hit all-time high

Leveraged loan bankers are expected to ask for record margins for underwriting any new European LBOs as original issue discounts (OIDs) on existing deals continue to widen. Banks have little desire to continue to subsidise private equity returns, which they have effectively been doing by selling at discounts well beyond their fees.

  • 28 Oct 2011

"If private equity want to do buyouts, their only option is to accept rising costs. The banks cannot subsidise the debt with OIDs," said one leveraged finance banker.

That point was underlined by a EuroWeek poll in which nearly half of respondents expected OIDs on leveraged loans in Europe ...

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1 Bank of America Merrill Lynch (BAML) 7,026 25 11.95
2 Citi 6,449 21 10.96
3 BNP Paribas 5,093 18 8.66
4 Barclays 4,040 11 6.87
5 Lloyds Bank 3,615 14 6.15

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5 TD Securities Inc 241.54 1 3.74%